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Seeing Sugar’s Future in Fuel

Sugar being processed at the Louisiana Sugar Cooperative mill in St. Martinville, La. Credit
Cheryl Gerber for The New York Times

LOREAUVILLE, La. — Todd Landry, a farmer who conjures big stands of sugar cane from the muddy fields of southern Louisiana, has been struggling lately against droughts and freezes and hurricanes. Come January he will confront another peril: expanded sugar imports from Mexico.

“Will we have a flood of sugar coming across the border?” Mr. Landry wondered in a Cajun drawl. “Survival is on our minds every minute of every day.”

Mr. Landry and other sugar producers think they have spotted a life raft, and its name is ethanol.

Taking a cue from Midwestern farmers who have improved their lot by selling corn to ethanol distilleries, sugar cane and sugar beet farmers want an ethanol deal of their own, paid for by American taxpayers.

A little-noticed provision in the new farm bill working its way through Congress would oblige the Agriculture Department to buy surplus domestic sugar caused by the expected influx of Mexican sugar next year. Then the government would sell it, most likely at a steep discount, to ethanol producers to add to their fermentation tanks. The Bush administration is fighting the measure.

Sugar producers say the cost would be relatively low and the plan would help keep prices at a level they consider fair. As a side benefit, the deal would allow the nation to produce more ethanol to mix with gasoline, displacing some foreign oil, they say.

But ethanol producers are unenthused. And the plan is drawing fire from opponents of agricultural subsidies and from longtime critics of the sugar industry, who complain that producers already have one of the best deals in American agriculture.

“It’s a tax burden without a benefit that distorts both the ethanol market and the food-ingredient market,” said Richard E. Pasco, counsel for the Sweetener Users Association, a lobby group for food companies that use sugar. “And guess who will pay the price? Taxpayers and consumers.”

The Congressional Budget Office calculates the cost at $660 million over five years, relatively cheap as farm programs go. But that is an estimate based on assumptions about how much sugar will come across the border. In truth, no one is sure.

“The U.S. Department of Agriculture would be taking on a limitless commitment,” said Robert L. Thompson, a University of Illinois professor of agricultural policy, “to buy any quantity of sugar offered at a guaranteed price, and that would get very expensive, very quickly.”

At issue is a provision of the North American Free Trade Agreement, the big trade pact meant to create a common market among Mexico, Canada and the United States. Though NAFTA was adopted in 1993, some of its more controversial provisions are only now taking effect.

Photo

The sugar comes from cane which grows mostly in Louisiana and Florida. The growers are expected to face greater competition from Mexico next year.Credit
Cheryl Gerber for The New York Times

One of them will soon open the United States to unlimited sugar imports from Mexico — the biggest crack in years in the wall of price supports and protectionism the government, at the behest of the sugar industry, has erected against foreign competition. That system includes quotas to limit domestic production and tariffs to limit imports, resulting in a market price for sugar in the United States that is typically twice the world market price.

The NAFTA provision will work in both directions, with the United States able to export to Mexico a form of corn syrup often used as a sweetener. That sweetener, much cheaper than sugar, could displace some sugar use in Mexico, making more available to ship to the United States.

Amid uncertainty over what will happen, the nation’s 12,000 sugar cane and sugar beet farmers are appealing to Washington for an insurance policy. “If Mexico decides to overproduce and send that to our market, they have the potential to eat up our market,” said James H. Simon, general manager of the American Sugar Cane League.

Sugar cane grows only in warmer states, with production concentrated in Florida and Louisiana. Farmers in some northerly states grow sugar beets.

In southern Louisiana, still recovering from hurricanes Katrina and Rita, cane is cultivated on 420,000 acres and has been a mainstay of the economy for generations.

Across a big swath of the state, the sweet smell of molasses wafts on the breeze in autumn, social life revolves around sugar fairs and festivals, and old sugar kettles decorate flower gardens. Whitewashed mansions, stately but not always well maintained, are shaded by live oaks draped with moss.

People fear the loss of a way of life with the onslaught of Mexican sugar. Louisiana’s farmers and mill workers say sugar is in their blood, in part because few crops grow so well in the difficult climate, punctuated in recent years by powerful hurricanes that ripped crops from their roots.

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“Sugar farming has been my whole life,” said Michael Comb, 48, general manager of the Louisiana Sugar Cane Cooperative in St. Martinville. “I was 8 years old when I got on a tractor in a sugar field. It’s all I know.”

Sugar farmers see the ethanol proposal as the beginning of a much larger national commitment to producing energy from cane.

Brazil, famously, has displaced much of its gasoline by turning cane juice into ethanol. Sugar prices in the United States are far too high for that — and this country imposes a steep tariff that discourages ethanol imports from Brazil.

But the American sugar industry believes that with new technology, the pulp left over after juice is pressed from cane could eventually become a fuel source for cars.

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A tractor carries sugar cane during harvest. Credit
Cheryl Gerber for The New York Times

The proposal under consideration in Washington “could be a bridge for greater things for sugar,” said Anthony Joe Judice, 61, who works fields along the muddy waters of Bayou Teche, near St. Martinville. “It’s like an engagement to a future marriage.”

The sugar ethanol provision has won approval in the House. With the support of Senator Tom Harkin, Democrat of Iowa and chairman of the Agriculture Committee, it may get through the Senate despite opposition from the administration and the food industry.

The measure would be grafted onto an existing sugar policy so complex that even many farmers have trouble understanding it. The government limits the supply of sugar through production quotas and import restrictions, and it uses financial mechanisms to set an effective price floor.

The system does not cost taxpayers money directly, a point of pride for the industry. But it costs consumers money in the form of higher sugar prices. The system has been subjected to withering criticism for decades, but the sugar lobby has clout on Capitol Hill. Sugar producers donated $2.7 million in campaign contributions to House and Senate incumbents in 2006, more than any other group of food growers, according to the Center for Responsive Politics, a Washington group.

The new farm bill would retain much of the existing system, which sugar producers defend on the ground that virtually every country with a domestic sugar industry has strong protections. But it would add more guarantees, including one that would assure American producers 85 percent of the market no matter how much sugar comes in from abroad.

To effect that policy, the government would buy excess sugar and sell it at a loss to ethanol producers. They ferment corn starch to ethanol, but adding a little sugar can speed the reaction.

Mark E. Keenum, the Bush administration’s under secretary of agriculture for farm and foreign agricultural services, said administering the ethanol program would be “very cumbersome.”

Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. “You can easily do the math and look at the loss potential,” he said.

He added that the department tried selling sugar to the ethanol industry in 2001, but ethanol producers were interested in buying only 10,000 of 100,000 tons made available to them, even at a low price of 4 cents a pound.

Ethanol producers, who could be forced to invest in new equipment to process sugar, say they do not have much use for the idea. “In today’s grain-based biorefineries, the amount of sugar you could introduce into the process would be fairly small,” said Matt Hartwig, spokesman for the Renewable Fuels Association.

Mr. Keenum said the Agriculture Department did not want to be forced to sell only to ethanol producers, arguing that it might get a better price selling sugar for animal feed, pet food or industrial alcohol. On that point, the sugar lobby is willing to negotiate.

The sugar producers say whatever its costs, the new farm bill is needed to save their industry.

“We don’t like the government spending money, but if they are going to give away our market to foreign imports then we have to look for alternatives,” said Mr. Simon of the American Sugar Cane League. “We’re confident we can get this farm bill passed and that will keep our heads above water until we’re able to realize the full opportunities of energy production from sugar cane.”